M8trix owners sue San Jose as licensing delay threatens opening

Owners of the newly built Casino M8trix have sued San Jose, asking a judge to force the police to sign off on its license, clearing the way for the $50 million cardroom's planned April 3 opening.

In court papers filed late last week, the owners argue that the city and the police department under Chief Chris Moore have "cleverly stalled making a decision" on final licensing, turned the process into "an exercise in harassment" and treated the business, which now operates as the Garden City cardroom on Saratoga Avenue, "like a villain."

"We are asking the judge to order Chief Moore to make a decision," owner Eric Swallow said in an email, on the license the cardroom applied for a year ago. "Here's what's at stake: at a minimum, 300 newly hired employees for the new location."

Santa Clara County Superior Court Judge Kevin McKenney on Wednesday denied the M8trix owners' request for an expedited hearing to meet the scheduled opening next week, and no new court date has been set. Swallow said he's uncertain now whether the planned April 3 opening will proceed.

"I don't know what we're going to do," Swallow said in an interview. "We've got payments due. It's a mess."

City officials filed papers in response arguing that the dispute stems from the owners' "own arbitrary deadline."

"The false deadline set by Garden City should not compel this court to interfere with the city's legitimate regulatory process," City Attorney Rick Doyle argued in court filings.

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It's not the first time regulatory approval has gummed up the opening of a new cardroom. San Jose's only other legal cardroom, Bay 101, went through an 18-month regulatory odyssey from City Council approval in March 1993 to its opening in September 1994.

Bay 101 officials had no comment on M8trix's licensing troubles.

M8trix owners, who also include Peter Lunardi III and Jeanine Lunardi, bought the Garden City cardroom in 2007, and have sought to break from its long and colorful past, including criminal convictions of previous owners, by moving and re-branding the operation.

M8trix's current owners argue in court papers that, after securing City Council zoning approval for the cardroom in May 2010 and development permits in December that year, they applied to the city on March 30, 2011, for a required cardroom permit amendment and landowner's license. They said they submitted requested financial documents the following month, and that city law requires the license investigation to be completed in 180 days.

The casino's owners argue police have "abused their discretion" over the cardroom's license and that delaying the scheduled opening will affect 720 employees -- including 300 new hires -- costing the casino and the city, which taxes its operation at 15 percent, millions of dollars.

But city officials counter in court papers that they told M8trix owners on Nov. 14 that the license applications wouldn't be completed before April 30, though Swallow said he was under the impression earlier this year that April 3 would be feasible.

M8trix owners in December sought permission to allow gambling on the top, eighth floor of its 165-foot office tower in addition to the main ground floor gambling room, something they argue is legal in California and done in at least two other cardrooms. But police have balked.

City officials say that multifloor gambling "poses significant health and safety issues" for police. Security cameras that M8trix owners have installed don't cover all areas, and required development permit changes have yet to be obtained for either the upper-floor gambling or proposed restaurant, banquet, entertainment and massage uses on the property, the city argued.

In a note to a Garden City representative earlier this month, the police department's gambling administrator, Richard Teng, said his division "has been working very diligently to allow Casino M8trix to open its ground floor casino as soon as humanly possible." But he said, "Garden City has yet to provide sufficient evidence" that allowing top-floor gambling "is consistent with public policy" and city law.

Doyle said gambling is "a highly regulated industry everywhere you go" and that the city shouldn't be stampeded by a court to approve casino operations that historically have attracted criminals and ruined many lives.

"It's one of those things where everyone's working at a pretty quick pace to get it done," Doyle said. "But we have to make sure from a due-diligence standpoint that it's done right."